The Australian Competition and Consumer Commission has announced it will oppose the proposed acquisition by Heinz of fast-growing premium baby food manufacturer, Rafferty's Garden.
The ACCC said the companies were the two largest suppliers of wet and dry infant food in Australia and the merged entity would have accounted for around 80 per cent of the share of sales in the wet infant food market and around 70 per cent in infant cereals and infant snacks.
ACCC chairman Rod Sims said the ACCC had concluded that the proposed acquisition was likely to result in a substantial lessening of competition as it would result in the removal of Rafferty’s Garden, which has around 40 per cent market share in wet infant food and is a close and effective competitor of Heinz, which also has around a 40 per cent market share in wet infant food.
“The proposed acquisition would combine the two largest suppliers of wet and dry infant food in Australia, resulting in highly concentrated markets where barriers to entry and expansion are high, particularly because of brand recognition and preference. This is likely to reduce the frequency and depth of promotional activity, increase prices and reduce innovation in the wet and dry infant food markets,” Sims said.
“Both Heinz and Rafferty’s Garden are disappointed by the Commission’s decision and are currently considering their options,” the companies said in a statement.
Companies are not legally required to notify the ACCC of a merger and can still proceed with the merger without seeking any regulatory consideration, however, the ACCC can subsequently investigate the merger, and, if necessary, take legal action.
The ACCC said, in reaching its decision, it carefully considered the dependence of both Heinz and Rafferty’s Garden on the major supermarket chains for stocking their products.
“We are not satisfied that the power possessed by the major supermarket chains will necessarily constrain prices for consumers or drive innovation. Fierce inter-brand competition is more likely to achieve this,” Sims said.
Heinz supplies a range of wet infant food in cans, glass jars, and pouch/pouch-and-spout packaging, while Rafferty’s Garden supplies wet infant food in pouch/pouch-and-spout packaging only. Both companies, however, supply dry infant products, including cereals, snacks and teething rusks.
The ACCC said it consulted extensively on the proposed acquisition, focusing on whether removing Rafferty’s Garden would reduce competition in the current market structure.
The ACCC has rejected the proposed acquisition of Rafferty’s Garden by Heinz.
